Coinbase Investment: Getting Started And What To Know

Coinbase is a cryptocurrency exchange that allows users to buy and sell various virtual coins, including Bitcoin, Ethereum, and XRP. It has been described as an on-ramp to the crypto economy, providing education to millions of users and allowing them to engage with crypto through buying, selling, spending, earning, receiving, borrowing, lending, and more. As of 2018, Coinbase was valued at more than $8 billion and had over 35 million users. Coinbase went public in 2021 and its shares can be bought and sold on the Nasdaq exchange under the ticker symbol COIN.

Coinbase shares: the basics

Coinbase is a US-based cryptocurrency exchange that acts as a platform for users to trade various virtual coins, including Bitcoin, Ethereum, and XRP. The company was founded in 2012 and has since become one of the most well-known and trusted cryptocurrency platforms with over 35 million users worldwide.

Coinbase went public on April 14, 2021, through a direct listing on the NASDAQ stock exchange under the ticker symbol COIN. This means that instead of the traditional initial public offering (IPO) route, Coinbase allowed its employees and existing investors to convert their ownership stakes into shares that were then listed directly on the stock exchange. This negated the need for an underwriter, usually a large bank, and resulted in increased volatility compared to a traditional IPO.

The company's share price opened at $381, giving it an estimated market cap of around $75 billion, making it one of the largest listings in history. Coinbase shares can be bought and sold on the NASDAQ exchange, and the company offers two types of accounts: regular and pro, with varying commission fee structures.

Coinbase's business model is centred around its two core products: a Global Digital Asset Exchange (GDAX) for trading cryptocurrencies, and a user-facing platform for buying and selling Bitcoin, Ethereum, Litecoin, and others. The company charges a commission fee for users to trade on its platform, and it also offers leveraged trading.

Coinbase provides an opportunity for investors to gain exposure to the cryptocurrency market without directly investing in cryptocurrencies themselves. However, it's important to note that investing in Coinbase comes with risks, as the company's performance is closely tied to the volatile nature of the crypto market.

How to trade Coinbase shares

Coinbase is a US-based cryptocurrency exchange that went public on April 14, 2021, and is traded on the NASDAQ stock exchange under the ticker symbol COIN.

• Open a brokerage account: You will need to open a brokerage account if you don't already have one. This will allow you to buy stocks like Coinbase and give you access to other investments like mutual funds, bonds, and exchange-traded funds.
• Search for Coinbase stock: Within your brokerage account's platform, search for Coinbase stock using the symbol "COIN".
• Decide on your position and risk management: Determine whether you want to 'buy' or 'sell' Coinbase shares. 'Buying' means you think the share price will rise, while 'selling' means you believe it will fall. Regardless of your position, it is important to manage your risk, especially when trading with CFDs, as leverage can amplify profits and losses.
• Choose your position size: Decide how much you want to invest in Coinbase shares, in dollars or shares. Remember to only invest an amount you are comfortable losing and that you won't need in the near future.
• Open and monitor your position: Once you have executed your trade, keep track of your position by monitoring the share price and staying up to date with any relevant news or announcements.

It is important to note that you cannot buy Coinbase stock directly from the company. Additionally, when trading Coinbase shares, you are typically taking a speculative position on the company's share price without owning the shares directly, as you are trading with CFDs (leveraged derivatives).

Coinbase: a brief history

Coinbase, a US-based cryptocurrency exchange, was founded in June 2012 by Brian Armstrong, a former Airbnb engineer, and Fred Ehrsam, a former Goldman Sachs trader. The company's initial mission was to make it easier to buy, use and store bitcoins. In its early years, Coinbase only offered the ability to buy and sell bitcoin via bank transfers, but it gradually expanded the range of cryptocurrencies available on its platform, including Ethereum and Litecoin.

Coinbase attracted significant attention in 2013, receiving a $25 million investment from major investors such as Andreessen Horowitz, Union Square Ventures, and Ribbit Capital. This funding round highlighted the growing recognition and confidence in the cryptocurrency industry. Over the years, Coinbase expanded its cryptocurrency portfolio and added new services, including Coinbase Pro for experienced traders and Coinbase Wallet for storing cryptocurrencies.

In 2017, during the cryptocurrency boom when the price of bitcoin soared to $19,000, Coinbase became one of the busiest cryptocurrency platforms, serving millions of new users. This period also saw a significant increase in trading volume on the platform.

In April 2021, Coinbase became the first major cryptocurrency exchange to go public through a direct listing on the NASDAQ exchange under the ticker COIN. This move was significant for the crypto industry, emphasising its growing legitimacy and acceptance in traditional financial markets.

Since its founding, Coinbase has played a crucial role in popularising and legitimising cryptocurrencies. The company actively participates in educational projects, supports startups and blockchain technologies, and contributes to the development of security and regulatory standards in the industry. Despite facing challenges such as security issues and regulatory pressure, Coinbase has continued to grow and innovate, striving to create a more open financial system worldwide.

What is a direct listing?

A direct listing, also referred to as a direct listing process (DLP) or direct public offering (DPO), is the process of a private company listing its stock on a national stock exchange without the use of an intermediary. In a traditional initial public offering (IPO), a company uses the services of intermediaries or underwriters to facilitate the IPO process. These intermediaries charge a commission for their work, which can be costly for the company. Underwriters are responsible for determining the IPO stock price, creating new shares, and facilitating stock sales before the IPO date.

In a direct listing, existing shares held by investors and employees are sold directly to the public, along with any newly issued shares. Companies that choose to directly list must still publicly file with the Securities and Exchange Commission (SEC) and comply with the same governance and reporting standards as other publicly traded companies.

Direct listings are often chosen by companies that cannot afford the costs associated with underwriters, want to avoid diluting existing shares, or want to bypass the lock-up period that comes with a traditional IPO. However, without an intermediary, there is no safety net to ensure that shares will sell. Direct listings also present the risk of increased volatility in share prices due to the absence of a target price range set by underwriters.

Some well-known companies that have chosen the direct listing route include Spotify, Slack, Squarespace, and Roblox.

What is Coinbase’s business model?

Coinbase's business model is centred around transaction fees that users must pay for services like buying or selling on the platform. In 2020, transaction fees made up 90% of Coinbase's revenue. The company offers two types of accounts: regular and pro. The regular account charges higher commissions, while the pro account has lower commission fees. Coinbase also offers a Coinbase Card, a Visa debit card with a 2.49% transaction fee for purchases.

Coinbase's mission is "to increase economic freedom in the world". The company aims to create an open financial economy with digital currency and be the easiest place to buy and sell digital currency.

Coinbase has two core products: a Global Digital Asset Exchange (GDAX) for trading cryptocurrencies, and a user-facing platform for trading bitcoin, bitcoin cash, ether, litecoin and others. The company offers accounts for potential clients for cryptocurrency trading, with over 25 cryptocurrencies available to its users.

Coinbase's customer segments consist of retail users, institutions, and ecosystem partners. The company has over 5 million monthly trading users and is used by over 6000 institutions. It also has over 100,000 ecosystem partners, including developers, asset issuers, and merchants.

Coinbase's revenue streams include cryptocurrency-to-fiat conversion, where users are charged a margin or spread of up to 2% per transaction, and transaction fees on the Coinbase debit card. The company also generates revenue from selling its own crypto assets.

Coinbase's key resources include merchant and payment providers, while its key activities include cryptocurrency exchange and API software development. The company's cost structure includes platform development and maintenance, datacenter operation, payment of personnel, and international exchange services.

Coinbase's competitors include Gemini, Binance, Bittrex, Bitfinex, Robinhood, and Kraken.

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